Ads pay off in higher Hershey earnings sales

by Jeff Gelski
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HERSHEY, PA. — The Hershey Co. posted net income of $147,394,000, equal to 64c per share on the common stock, in the first quarter ended April 4, which compared with $75,894,000, or 33c per share, in the previous year’s first-quarter. Sales in the first quarter jumped to $1,407,843,000 from $$1,236,031,000.

“Hershey’s first-quarter results were strong against all key metrics, as our core brand momentum continued to build in the market place,” said David J. West, president and chief executive officer. “Financial and market place performance exceeded our expectations as higher levels of advertising and consumer promotion, as well as focused sales execution, resulted in solid net sales and retail takeaway.”

Hershey shares on the New York Stock Exchange were trading at $46.77 per share in the mid-morning of April 22, which was up from a close of $44.88 per share on April 21.

First-quarter results in 2009 included net pre-tax charges of $19 million, or 5c per diluted share, associated with the Global Supply Chain Transformation (GSCT) program. Excluding those charges, adjusted net income in the first quarter of 2009 was $85,992,000 or 38c per share.

In the first quarter of 2010, growth in international business and a one-point benefit from foreign currency exchange rates also bolstered results, Mr. West said. U.S. retail takeaway rose 7.5% in channels that account for more than 80% of Hershey’s retail business.

“This period benefited slightly from an early Easter, which was one week earlier than the previous year,” Mr. West said. “Excluding the impact of Easter seasonal activity in the year ago and current periods, Hershey’s retail takeaway increased 5.5%.”

U.S. advertising in the first quarter increased about 68% behind continued support of such core brands as Hershey’s, Reese’s, Kisses, Hershey’s Bliss, Kit Kat and Twizzlers and new advertising copy on the York, Almond Joy and Mounds brands, Mr. West said. December new product launches, primarily Hershey’s Special Dark, Almond Joy and York Pieces, exceeded internal expectations behind advertising and distribution support.

Hershey expects advertising expenses to increase 35% to 40% in 2010, which is up from the previous estimate of 25% to 30%, Mr. West said. Hershey expects net sales in 2010 to increase at least 6%, including an approximate one-point benefit from foreign currency exchange rates. The 6% gain would exceed the long-term objective and initial estimate of 3% to 5% growth. Adjusted earnings per share-diluted is expected to increase in the low to mid-teens on a percentage basis from 2009.

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